Singaporean firm buys £130m UK regional asset

An Asian real estate investment firm backed by the Al Rajhi family office based in Riyadh, Saudi Arabia, has bought an asset outside of a major gateway city for a UK income-based property strategy.

Rather than acquire prime property in central London or a major UK conurbation, AEP Investment Management has opted to buy Trident Place office complex at Hatfield Business Park located around one hour north of London, agreeing to buy it from Australia’s Goodman Group for more than £130 million (€163 million; $222 million).

DTZ said it represented AEP in the deal, which is a Singapore-based fund manager focussed on sharia-compliant funds whose chief executive officer and managing partner is Yusof Wahid who previously worked at DTZ before starting boutique firm AsiaEquity Partners and latterly AEP in 2008. The firm’s senior principal in London is John Mundy, who was formerly a principal at CIT and UK developer Omega Land, which was renamed by Morgan Stanley in 2005 when the bank acquired the development arm of The Royal Bank of Scotland.

Trident Place is a development comprising six self-contained, Grade A office blocks totalling 472,000 square feet of lettable space with one of the tenants being Everything Everywhere (EE), the largest mobile operator in the UK.

Mundy said the firm had been on the hunt for quality income-based investments and that Trident Place represented an investment with “good real estate fundamentals and backed by strong covenants”. He explained: “We like the quality of the real estate and lease covenants, and the property fits into our larger objective of building a portfolio of income generating real estate assets in the UK and potentially across Continental Europe.”

The investment comes at a time when prime yields in cities such as London, Munich and Frankfurt are at historically low levels, making regional investments appear to be a realistic alternative. London-based real estate broker Savills said today in a report that given the ongoing pressure on prime CBD yields, investors were increasingly looking to non-CBD areas and to regional cities in some markets. In the UK and Germany prime properties in the regional cities have seen a surge in demand, coming increasingly from cross-border buyers. Total transaction volumes increased by 91 percent in Manchester and 76 percent in Birmingham, while office investment jumped by 150 percent in Dusseldorf, 130 percent in Hamburg and 93 percent in Munich.

Marcus Lemli, head of European investment at Savills, said that investor interest was “broadening” across Europe both regionally and across the risk profile. “This is reflected in the strong transaction volumes recorded in the year to date. Markets such as Ireland and the Netherlands, which recorded +43 percent and +31 percent growth respectively in volumes in Q1 2014 compared to Q4 2013, prove that recovery is coming to several countries.”

Commenting on overseas investors in UK real estate generally, Jason Winfield, head of UK investment at fellow broker DTZ, said: “International buyers continue to be highly diverse with investors from North America, Europe, the Middle East and Asia targeting the UK market. Of these investors, Asian investors are the most active currently with new buyers from China and Taiwan, alongside the now established purchasers from Hong Kong, Singapore, Korea, Malaysia and Japan. DTZ continues to track around £25 billion of international capital seeking to invest in the UK market.”

He continued: “In addition to the rising office occupational markets in the UK, the competition for the most attractive available investment opportunities between these investors, and resurgent domestic investors, is a major factor behind the expected yield compression across all sectors.”

The acquisition of Trident Place is not the first UK investment by AEP. Two years ago, it bought through its Securus Data Property Fund – which is a joint venture with Singapore’s Keppel Data Centre Investment Management – a property at Greenwich View Place in London’s Canary Wharf office complex.